Projects

Bovill Kaolin

The Project geology is characterized by the Thatuna Batholith, a granitic intrusive of Cretaceous age, composed mainly of Na-feldspar, K-feldspar and quartz. The mineral deposit is the overprinting of the intrusive rock by a weathered saprolite horizon which directly overlies the bedrock from which it was derived. During the natural processes of weathering, the original plagioclase feldspars have preferentially broken down to produce the clays kaolinite and halloysite. The K-feldspars have resisted weathering to a degree and much of the original component remains as free grains. Similarly, the quartz component of the host rock remains as free grains in the weathered material. The mineral resource products include kaolinite, halloysite, K-feldspar and quartz.

The exploration programs supporting the mineral resource estimate consists primarily of diamond core drilling, sampling, chemical analysis and material characterization studies. The drillhole database supporting the resource estimation of this report consists of 322 diamond core drillholes totaling 35,909 ft. The drillholes average 112 ft in length, all are oriented vertical and spaced on 100 to 200 ft centers. The original assay sample lengths generally range from 5 to 10 ft with an average of 5.8 ft. Analytical testing consists primarily of material characterization studies used to support the resource estimation of this report. This work involved two general areas of study including particle size analysis and clay characterization.

Resources and Reserves

The mineral resource statement completed by SRK Consultants (USA) Inc. of Denver, CO is presented below. The resource is confined within a Whittle™ pit design. No cut-off grade (CoG) isapplied to the resource because all recovered material in the resource estimation contains sufficient sand, kaolinite, or halloysite to be mined for a profit.

• Note that values presented here have been rounded to reflect the levelof accuracy.

Source: SRK Consulting,2014

Portions of this resource were then upgraded to proven and probable reserves as part of the a June 2014 Prefeasibility Study.

Mineral Reserve Statement, (as of June 14, 2014)

Reserve

Mt

Halloysite
Grade

Kaolin Grade

Qtz & K-Spar
Sand (%)

Halloysite
Tons

Kaolinite
Tons

Qtz & K-Spar
Sand (t)

Kelly Hump

Proven

1.7

4.8%

13.5%

81.7%

82,000

229,000

1,389,000

Probable

1.0

6.0%

15.4%

78.6%

60,000

154,000

782,000

Kelly South

Proven

0

0

0

0

0

0

0

Probable

1.3

1.6%

23.2%

75.3%

20,000

296,000

959,000

Middle Ridge

Proven

0.7

6.9%

12.8%

80.3%

48 ,000

90,000

563,000

Probable

1.4

4.6%

13.1%

82.3%

66,000

187,000

1,179,000

WBL

Proven

0

0

0

0

0

0

0

Probable

0.8

2.4%

16.5%

81.1%

18,000

128,000

629,000

Source:SRK

Notes:

Some numbers may not add up as a function of rounding.

Reserves are based on 100% mine recovery and 0% dilution. This is due to the small equipment being utilized and th selectivity of the material being mined.This will require further review as part of additional studies.

Halloysite processing recovery is 90%.

Kaolinite processing recovery is 90%.

Quartz and K-Spar processing recovery is 68%.

Variable selling prices were used depending on supply.

There is an overall strip ratio of 0.69:1 (waste:ore).

Economic Analysis

As part of the June 2014 PFS, SRK estimated the initial capital required to be US$72.7 million with an additional US$18.2 million in sustaining capital yielding total Life of Mine capital estimated at US$90.8 million.

Operating costs are estimated on preliminary mine and process design criteria, engineering, as well as budgetary quotes. Over the LoM, operating costs will be about US$70.72/t of product.

The financial analysis results, shown in Table 1.12.1, indicate a NPV 6% of US$212.7 million with an IRR of 30.5% (after estimated taxes). Payback will be in 3 years from the start of production. The following provides the basis of the SRK LoM plan and economics: